The Central States Pension Fund (CSPF) serves 400,000 workers and retirees and is expected to become insolvent by 2025. Before the coronavirus pandemic, 130 plans were projected to run out of money over the next two decades, but now that number threatens to climb even higher. How did we get here? Who’s to blame? Will the new Democratic majority in both Houses of Congress act on much-needed pension reform? Taft-Hartley Consultant of the Year and partner at New England Pension Consultants, John Elliot, joins Traci on the podcast to help answer some of these pressing questions.
Some highlights from The Pension Crisis: How We Got Here include:
01:27 – From Weiss, Peck & Greer to NEPC
04:37 – The “Perfect Storm” of the 1990s and 2000s
07:52 – The Dreaded MPRA Cuts
09:43 – Why Pension Reform is Both a Democratic and a Republican Issue
11:17 – Variable Defined Benefit Plans
13:22 – The Mathematics of Hybrid Plans
18:43 – Dismantling the Fears of Hybrid Plans
20:47 – Union Membership and Millennials
29:38 – Macro Economy and the Price of Debt
If you'd like to learn more about New England Pension Consultants, visit their website: www.nepc.com
This is The World of Multiemployer Benefit Funds Podcast with Traci Dority-Shanklin. If you're interested in labor and union benefit funds, well, you've landed in the right place. We are a go-to source for all things union benefit fund-related, and we are going to bring you interviews with key decision-makers and fund professionals that guide these plans. They'll share their insights, experience, unique perspectives, all the latest developments, and tips to unlock the mysteries of multiemployer benefit funds. Time is short, so let's get started.
Traci Shanklin 0:37
My guest today is John Elliot, a partner with NEPC, the New England Pension Consultants. Before joining NEPC in 2003, John was a team leader at Marco Consulting Group for their Taft-Hartley consulting practice, where he developed and cultivated the Taft-Hartley market for the western region. He has made educational presentations and spoken at numerous national conferences including the International Foundation for Employee Benefits and CORPaTH. In 2005, he was named Taft-Hartley Consultant of the Year by Money Management Letter, a biweekly publication dedicated to trends and news in the North America defined benefit pension fund industry.
Traci Shanklin 1:22
Hi, John, and welcome to the podcast.
John Elliot 1:25
Thanks, Traci. Thanks for having me.
Traci Shanklin 1:27
So, I like to start all of our shows with you sharing a little bit about your background and how you came to NEPC.
John Elliot 1:35
Sure. Well, I started my career at Weiss, Peck & Greer in the investment management side of the business. I started in their Taft-Hartley group. I've worked on Taft Hartley plans my entire career since I started. Was there for about seven years. They were bought out by a larger organization and things changed a little bit as they tend to do when something like that happens. And I decided to start looking for the next chapter in my career. And I was actually approached by Marco Consulting Group about maybe joining the consulting side on the west coast because they were - they were having trouble, you know, expanding their West Coast operations. And so it was intriguing. I asked around about Marco and about consulting in general. And I decided that was - it was a good move for me. So, I did it. And I'm glad I did because I really do enjoy the consulting aspect. And I was there for about four years and some things changed at that organization as well and led me to NEPC, which is where I've been for the last 17 years. And as you mentioned, I'm a partner there now, and I do run the Taft-Hartley team at NEPC and again, 17 years very happy there. I found a home. So, that's a brief synopsis of my career.
Traci Shanklin 2:47
I asked you today on the show because of your extensive background with Taft-Hartley, as you said, it's pretty much been your career since the beginning, and I want to get your take on how coronavirus has impacted the Taft-Hartley funds, in particular, the multiemployer plan funds. We know that prior to COVID there were approximately 130 funds projected to insolvency. So, before we get too much into the damage inflicted by - on these plans by the coronavirus, I wanted to just see if you could set the stage a little about what was happening prior to COVID-19? And what kind of shape these plans were in?
John Elliot 3:30
Yeah, so, the thing about the defined benefit plan design is when they were first put together and planned, you know, 40 years ago, 50 years ago, the concept of it was that you're going to have new and increasing number of people coming into defined benefit plans. And those contributions and the growth of those plans will go in perpetuity to make sure we pay the benefits for the beneficiaries who are retired. Now the life expectancy when these plans were started, and the design of these plans was a lot less than it - than we've experienced over the last you know, 20 years with - the with all the different medical technologies that we have. So, people are living longer. And then industries - certain industries specifically started having problems having issues. So, when you get the imbalance where you have as many or more retirees as you do people contributing, the only way to solve that problem is to have massive increases in contributions because you cannot decrease benefits based on plan design.
John Elliot 4:37
So, that's what really led us to these plans becoming insolvent, and the plans that are doing well are plans that are growing - growing their contribution base of employees contributing into the plan. And plans that had benefit levels which also were more attuned to what the contributions were and planning for the aging population and living longer. You also had this unfortunate situation, the perfect storm of basically 1999 - 2000, where you had plans that were doing extremely well, based on what the markets were doing in the late 90s. And most of them were pretty plain vanilla stocks and bonds. And you had, you know, these massive increases in those plans, in dollars and in funded status. And it got to a point where they were in danger of losing the tax-deductible contributions that the employers have into the plans based on the loss because they didn't want plans to be significantly overfunded. And it was more targeted towards corporate plans. So, corporations wouldn't just stash money as a tax haven into the defined benefit plans to later take that money back out, have it grow, and then take it back out because they're overfunded, which they could do.
John Elliot 5:55
That didn't - multiemployer plans can't do that, but it impacted those plans because the laws applied to defined benefit plans. So, you had these massive increases in funded status, and they had to do something in order to prevent them losing that tax-deductible contribution. And what a lot of plans did was they increased benefits. So, when you increase the benefits, it decreases your funded status. And that's what they did. That's how they fixed the problem. The problem with that was that then 2000, 2001, 2002 hit and the decade of the 2000s, basically, where you had a zero return for equities for 10 years. So, here you go, you've increased your benefit liabilities. Your assets have not grown to match that based on what's happened in the markets for the next 10 years. And you had a significant decrease in funded status for a lot of plans. I call it the perfect storm because then 2000 to 2008 was involved in that. And you also had decreased contributions.
John Elliot 6:53
You also had in 2008 a situation where a lot of plans took away early retirement benefits and different things, but they had to announce it. So, you saw a mass exodus in some plans of people that said, "Okay, well, I can do early retirement with no reduction in my benefit, if I do it before this date, because at this date, the plan rules change." And so, you saw that happen in a lot of plans. And so, if - if plans had that imbalance, where you had more retirees than people with contributions, and then you have all these things happening in the early 2000s, it really, really negatively impacted plans. And so, in some plans, were able to navigate through that because of the contributions. They were able to either increase contributions or expand the number of active workers versus the retirees and others that were in more dying industries, unfortunately, are not surviving. They're on that list.
Traci Shanklin 7:52
Right. That's one of the clearest explanations that I've ever had of, as you put it, the perfect storm. So, what if anything is being done to assist the plans that were in trouble 130 funds that I referred to earlier?
John Elliot 8:07
So, the only thing that's been done, and it's more of a last resort situation that really hasn't even been managed very well, is the MPRA. So, basically, what they've said was if the plan has no way of getting out of, you know, going towards insolvency, that you could apply for the ability through the Treasury of reducing accrued benefits. And the way it's structured is really, I don't even know how to describe it, but goofy, in the way they've set it up. And they've rejected a tremendous amount of applications including the Central States Teamsters on wanting to make these MPRA cuts. They make you jump through all these hoops. And listen, anyone who's going to apply for a MPRA cut is doing so to try to save the plan. So, that they don't go to the PBGC and start getting, you know, close to 30 cents on the dollar on their pension.
John Elliot 9:05
You know, so okay, so you get 25%, 30%, 40% cut in your pension, that's horrible for anybody. But it's better than getting 70% cut. And they're thinking also about the current people contributing to the plan who may never get $1 of benefit out of the thing or very, very little benefit down the road from the PBGC. So, they're trying to do the right thing, and they're getting rejected because it's very murky on what the rules are, and what would constitute a legitimate request through MPRA. That's the only help legislatively and tools that they've given for these plans that are in trouble.
John Elliot 9:43
There's been talk, and there's been negotiations on pension reforms because it really applies to both Democrats and Republicans, because you've got the workers who a lot of them are Democratic and through the union workers, but then you've got the employers who are a lot of Republican, a lot of them are Republicans. Not all of them, but a lot of them are Republicans. And, you know, they're both getting impacted because you've got these employers with this unfunded liability that affects their balance sheet and affects their other company. And you've got the workers, you know, who want their retirement that they've been putting money into for their whole careers. There was according to - what's the name of that organization, DC, the, uh, it's NCCMP, sorry, sorry about that.
Traci Shanklin 10:24
John Elliot 10:25
National Coordinating Committee for Multiemployer Plans. I've talked to them, you know, throughout the pandemic, and they thought that they were getting - they were having some movement towards negotiating something. They actually threw into the bill that they tried to pass originally, some legislation for pension funds. The Democrats in the House put together but they had to take it out because the Republicans wouldn't budge on that. That was one of the things they demanded that they take out of the bill. So, it's going to have to be negotiated separately, and there was some - some movement, they're getting closer to doing something. But when they do something, they're gonna have to fix the problem, structurally, as far as how defined benefit plans work. Because again, when they were set up, I mean, they had all the best intentions, but I think that they never anticipated the life expectancy. And obviously, things have been done to help with that. And then the market fluctuations.
John Elliot 11:17
You know, there's - there's these variable-defined benefit plans that are out there. You know, some of the things that I've heard conversations about is possibly having the law change. So, if you convert to a variable plan, and then the people who would have their benefits cut, based on experience, so the variable defined benefit plan has the benefits tied to what the returns of the plans are, as opposed to a stated return that if you don't make it, then the funded status goes down. It eliminates the unfunded liability for employers, which, you know, is good and bad to a certain degree. But you know, if you think about growing these plans, employers don't want to go into a plan and potentially get unfunded liability. So, there's something that needs to be addressed. But, if you do something to convert the plans, and then the people who would then lose benefits have that be the targeted of the monies that would be coming from the government as far as not only use word, "bailout," but an "assistance," because these plans need assistance in some way. They need monetary assistance. If you did that, it'd be a one-time fix because you would address the people that would be losing or reducing their benefits significantly. So, you'd have that money come in to mitigate that. And then the benefits from there forward would be based on returns, which is how those plans are structured. And so, if you did something like that, then you could fix the problem in perpetuity. You don't have to, you know, another five years throw some more money at this because it potentially has another - another downturn. And we have the same problem all over again.
Traci Shanklin 12:51
So, is that what was formerly being referred to as the hybrid plan?
John Elliot 12:56
Yes, that's the hybrid plan. Yes.
Traci Shanklin 12:59
So, I know, from past research that I did that there were, I guess, 13, or 14 different states that had implemented hybrid-esque plans, and I'm sure they're all slightly different. Do you know if there's any data out there that speaks to the success or failure of them.
John Elliot 13:20
No, they're - they're too new.
Traci Shanklin 13:22
John Elliot 13:22
And too few plans have done it. But I mean, mathematically, the way it's structured, it makes sense. Because the benefits are going to be reflective of returns. And you can also, you know, the seven and a half percent return, you know, that's gonna be the toughest challenge for all plans, including healthy plans going forward, at least in the near term, the next 10 years. Not just based on NEPC's forecasted, you know, capital market assumptions, but you look at the averages of different consulting firms, the investment managers, the big investment houses, JP Morgan, Goldman Sachs, Morgan, Stanley, those guys, you look at the averages of expected returns over the next 10 years. And it's really hard to get to the seven and a half number - extremely difficult. And even over 30 years, it's difficult for a lot of the projections that we're seeing. So, I think that's gonna be the biggest challenge facing plans is getting to that number, because the only way you can do it based on projections again, you know, and by the way, those projections have been wrong for just about everybody the last five years. Everyone thought that equities weren't going to do as well as they did, based on valuations and different things. But yeah, it's gonna be hard to make those numbers. And those variable plans have a much lower assumed rate of return. You know, it's more like 5%, five and a half percent, you know, that range.
Traci Shanklin 14:45
So, I have two questions. One, you may not have the answer to, but I'll ask it anyway. But, the first one is the benefits - so, with a hybrid plan, you're saying that the benefits are tied to the returns of the fund. Are you going to get pushback on that particular issue? And I'm just - I'm speaking from a past experience - past conversation I had, you know, 10, 20 years ago actually with my father where he was saying like defined benefits are basically the - the foundation and the lifeblood of organizing, right? So, from the union's standpoint, I mean, I know, that's sort of a leading question, but do you think that there's going to be an issue with getting that over that hurdle, getting people over the hurdle of that idea?
John Elliot 15:31
There will be for a couple of reasons. Number one, it's new and different. And people think, you know, we're giving up on the promise. And, you know, our best thing which is offering this plan, but the nice thing about the hybrid plan is it still offers a guaranteed benefit for life, right? Now that benefit will be - could change and be different based on what's going on in the investment program. But it's still giving you that guaranteed benefit for life, which you don't get in defined contribution plans. You get, you know, the money that you've made on your investment portfolio in your individual pension plan, and that's what you get. And you have to manage that. And how much do you take out? How do you invest it going forward? There's all these other questions. These are all professionally managed funds, and you have a guaranteed benefit based on, you know, what's going on in markets.
John Elliot 16:24
And the way they're structured, there's a reserve level as well so that you never go below zero on the accrual. And the way they're structured is they create this - this kind of safety valve of a reserve fund, which is invested even more conservatively. And that's there to make up for the times when you have negative returns in your portfolio. Now on the flip side, when you have very high returns in your portfolio like think about 2019, what gets accrued to the benefit isn't 100% of the upside, right? So, if you think about, you know, you're up 15%, the accrual to the benefits may only be 8% or 10%. Right? Not the 15%.
Traci Shanklin 17:05
John Elliot 17:06
That's there to create that reserve. So, if the markets go down, and the- and the fund is down 5% or 6%, you don't get a negative 5% or 6% impact on the fund. It's a 0% impact. So - so, you're not losing that money and from the benefits standpoint. And that's the structure. And because you're invested more conservatively, you're not going to have the big ups, bigger upswings, and you're not going to have the bigger downswings because you're not trying to shoot for seven and a half, you're shooting for 5%. So, it helps mitigate that volatility of returns and the volatility of benefits.
Traci Shanklin 17:42
John Elliot 17:43
But yeah, it's gonna be a hurdle. And there's going to be education that's needed to say, "This is still a guaranteed benefit for life, just like the defined benefit plan. But the structural issues with the defined benefit plan, when it was created, you know, 50 years ago, are being addressed in the new hybrid plan, but still making sure that the main thing which is that guaranteed benefit for life." Now, the only way you can get that in a defined contribution plan is to buy some sort of a guaranteed life program that - that some of the insurance companies offer. But from my research, and a lot of those, the fees and the assumed rates of return that you get from those funds are so low that it really reduces your benefits. So, what you should be able to generate in returns and then you know, income for yourself for life gets drastically reduced. But again, it's - you're taking away the responsibility, and you're giving it to the insurance company who's gonna guarantee to pay you for the rest of your life, a certain monthly income. This does the same thing but much better structure.
Traci Shanklin 18:43
Yeah, I've long since been a believer in these hybrid plans. I mean, since I first heard about them back in probably 08, 09. And they seemed to be a really big conversation after the housing crisis. So, it'll be interesting. What hurdles do you think are there to prohibit this kind of reform or restructuring?
John Elliot 19:03
Yes. So, one of the things that is a hurdle is, you know, when you take away the unfunded liability component of the plan, there's a fear potentially, of employers possibly pulling out and going non-union, because they can. You know, right now, if an employer pulls out and decides I'm going to be a nonunion employer, and they're part of a defined benefit plan, they have to pay the unfunded liability that they currently have, unless they just go out-of-business, like the guy's retiring, and he just shuts his company down, which is also an issue, by the way. Because if he has unfunded liability, and he shuts his company down and says, "Okay, I'm done. I'm retiring. My kids don't want to do this. I'm just closing shop." That unfunded liability gets put on to all the other employers that are still in the plan. So, that's not really fair either.
John Elliot 19:58
But that's the fear. You take away that hook that you have and are employers going to leave. And that's a serious concern. I don't have a good answer for that. I'm thinking more about the structure of the plans and the benefits for the people, and how to make sure that we guarantee that or get a way to get that more secure. As far as the employer side that I don't know. But, on the other hand, you're not going to get a new employer to go into a defined benefit plan that has unfunded liability. That's going to be an almost impossible task. So, the hybrid plan creates the opportunity for organizing and getting new employers in because they're not going to have that, you know, hook that's going to keep them there forever. And obviously, that makes it tougher in negotiations, but it could open the door for growing market share.
Traci Shanklin 20:47
So, this may be getting off your area of expertise, but I presume you've thought about it. So, you mentioned the fears of, you know, the unfunded liability, the fear of the employer going non-union or going out-of-business. One of the - the interesting metrics I've seen of late is that unions are seen more favorably today than they ever have been. And part of it I would argue is about millennials and their attraction to the companies whose ethos are about, you know, good for everyone, you know, about improving the world kind of thing. They really do seem to attach themselves from a marketing standpoint to ideals, and the union ideals are resonating. Do you think that some of those fears can be put at least - not they're not going to go away - but can or will shift if union membership and organizing has, you know, its moment again, in our history?
John Elliot 21:57
So, I can't really comment on the millennials because I am very ignorant as it relates to what millennials like or think. I've had issues with that. And it's just - it's just very different. But I do think that there's the opportunity for the new Industrial Revolution of the United States. And that's going to be our infrastructure. Our infrastructure is rated, you know, d plus / c minus internationally, compared to other countries. There's so much work needed to be done in this country, to get us to where we need to be, and get us into the 21st century as far as energy and all those things. And I really think that those skilled labor jobs - if it's done correctly in the way it should be done - it could be the next Industrial Revolution in creating a whole list of jobs that are high-paying jobs with benefits that could increase market share for unions. I really do.
John Elliot 22:57
I think, you know, what's - what's going on within COVID, and thinking about workers and the frontline workers; nurses who are heroes; UFCW workers going to work and risking their lives literally, you know, for everyone's benefit. You know, I think there's going to be an appreciation for those people, and, you know, joining a union and forming unions, I think there's the opportunity for it to grow significantly. We've been on a decline for so long, I think there's an opportunity to really grow market share for unions for all the reasons I just stated, but also the reasons that you stated that people are valuing this.
John Elliot 23:34
You know, I have three older children that are in their 20s - all of them in their 20s. And they're asking me about saving money. You know, they want to save money for retirement and different things. And they're asking me questions about it. And, you know, two of them are in college. You're in college; you should be worried about going to college, you know, as soon as you get out of college, yeah, you need to start saving. But yeah, they're thinking about it. I mean, I had never thought about it back then. I mean, I signed up for the 401k when I - when I first got in my first job, but I mean, they're thinking about it before they're even working. And I think they're worried about that, you know, and realizing that - that's going to be something they're going to have to do because they had to take care of themselves. Nobody's gonna take care of them. And the idea of a plan that can be put in place where they'd be more taken care of, it's going to be more attractive.
John Elliot 24:24
I can tell you, you know, the mentality of people was, "Okay, how much am I making? How much money am I gonna make? And this guy's gonna pay me more, I'm gonna go work there." And you saw a lot of people jumping from job-to -ob. You saw that before. You know, I think that they're going to be asking, and I've seen it doing interviews, "What's the retirement plan like for NEPC? What's your health care program?" Those are questions that I used to not get very often in interviews. They'd be asking about what's - what's the salary? What's the bonus structure? All those different things. Never really thinking about those other things. But now those are questions that are coming up with the - the younger generation. So, I agree with you, I think that's going to be a sea change in that, and the opportunity to really grow market share because of just changes in the way people are thinking about things.
Traci Shanklin 25:11
So, I want to circle back to COVID. And, you know, at the beginning of the coronavirus, I spoke to a bunch of people just to see if there was any analysis on the impact of the crisis. And, you know, at the time, there really wasn't a lot of data on how this was going to affect the economy, Taft Hartley funds, multiemployer funds. So, are you seeing any significant effects? Or do you have or does NEPC have a macro position on what we are heading into, as we sort of, you know, climb out, hopefully, of the - of the coronavirus with the vaccines? And how the economy, you know, there was so much talk about it being in, you know, a V curve and all that stuff. So, what - what is your analysis of it?
John Elliot 26:05
Yeah, so, I mean, you know, you start the question with the impact on plans, you know, I think we think about it a couple of different ways. The first is what's the direct impact on plans. And it really falls into three types of impact. I'm just talking about from the plan perspective. You know, the first is some plans are getting creamed because of COVID. And those plans are really the service trades like hotel employees and restaurant employees. And the reason the plans are getting impacted is because a lot of those workers were laid off. And yes, those - some of them got stimulus money and unemployment, but that didn't put any money into the plans. So, you have all these people that are not working, and you've got benefit payments that continue. You can't stop paying benefits. So, you have a significant negative cash flow out of plans that a lot of those service trades hadn't experienced before.
John Elliot 26:56
You know, so it's not only impacting, you know, the dollars coming out of the plans, and they're actually, you know, losing money that the dollar went out, even if, because you had - first of all you had, you obviously had the downturn in the first quarter, which obviously took the values down, and then you had more negative cash flow from there forward through the rest of this year because people weren't working. So, that's really impacting the plans, because once the plan goes down in value, and then you start taking money out as it rebounds, it's not going to rebound as much from $1 perspective. I don't care what the return says it's the dollars. And if there's less dollars in the plan generating the rebound returns, it's not growing the dollars the way it should. And so that negative cash flow has really impacted those plans. That's one type.
John Elliot 27:43
The second type, you know, is a lot of construction plans. There's been, you know, some impacts - slight to little impact on some of the plans. Some hours are down, in some cases; some cases hours are up because, you know, if a company is not having workers there, and they want to do some rehab or make some changes, it's a good time to do it. Interest rates are super low. They can borrow money very cheaply and get some stuff done while you know the business doesn't have - doesn't have an interruption to their business as much because business is slowing. So, you saw - and that's also regionally different, too. So, those are the slight to little impact.
John Elliot 28:19
And then the third one are the plans that really have benefited, and just the plan itself from what's going on in the world as relates to COVID. And those are plans like the United Food and Commercial Workers, and the nurses. Their numbers are increasing as far as people are increasing. And pay has gone up, and contributions have gone up. So, you're seeing a significant increase in contributions from those types of employees. Now, again, they're - they're heroes, and they're - and they're taking - risking their lives for us. And they should be getting more. They deserve it.
John Elliot 28:55
From the standpoint of from returns, you know, disciplined rebalancing has been the key, in my opinion. You know, a lot of people - you get scared when you have a pandemic, and, you know, you don't know what's going to happen, and what's going on with the economy. And so, you know, if you're not disciplined and you don't rebalance in April, after the March drawdown, you know, you're not going to have the same rebound effects that you do if you're disciplined and you do the rebalancing. There's been a significant growth versus value differential. And that's gone on for the last 10 years and really was exacerbated this year. It got to the point where it looked like 1999 - the differences. And so, being disciplined to rebalance back to value from growth was also important in this pandemic.
John Elliot 29:38
You know, as far as macro economy, what's really getting impacted are small businesses. You're seeing that significant impact. A lot of small businesses are getting hurt. And unfortunately, people on the lower end of the economic spectrum are really the ones getting negatively impacted. So, you're actually not seeing as much of a drop-in demand as you would think because individuals in the middle and higher incomes, a lot of them are still working and still gaining, and still making the same type of money. And they're not spending as much money on different things like commuting to work, going on vacation, doing those things. So, those industries are getting impacted. Like I said, hotels, airlines, all those things. But you know, people are shopping because they have extra money. They have - because they haven't lost money. So, you're seeing kind of a bifurcation as it relates to that economically.
John Elliot 30:30
You know, going forward as the vaccines come on and getting back to normal, I think we could see, you know, a significant run in equities because of the government intervention. It's one of the themes that NEPC has, you know, going forward is government interventions. We've never seen so much money being, you know, printed and borrowed to put into the economy as we've seen the last 12 years. I mean, it happened in 2008, everybody was shocked at how much money was put into the economy - a half of trillion dollars. I mean, in this one, it's, you know, six to seven trillion dollars. And then we just did another trillion. So, $8 trillion. I mean, that is unprecedented. That is why the markets rebounded as much as they have because there's a backstop. You know, they're not going to be left to fail. It's one of the things that was criticized actually of the government back in the Great Depression. They didn't do this. They didn't do what we're doing now. And things were they just let banks fail. They let a lot of businesses fail, and it took a long time to recover.
John Elliot 31:34
But, there'll be a price to be paid for all that debt that we have because we have to service that debt. Money is printed - a lot of money was printed, so we might have inflation. So, there's certain strategies that we're thinking about going forward as far as how to address that, you know, infrastructure investing is something that we've been looking very hard at. And we've been putting money - more and more money into infrastructure investing. From a private equity standpoint, you know, some companies that are smaller that have struggled, there might be a lot more acquisitions that come up that companies increase their debt significantly. It's one of the largest - I think it was the largest year for companies issuing debt as far as dollars this year. And some of that debts, they're not going to be able to pay it back when debt comes due and everything. So, it's - it's - there's going to be some distressed opportunities as well. So, yeah, we're thinking about, you know, where to make, you know, to make allocations within client portfolios, and we're actually having our off-site meeting, I believe it's next week, or the week after next. Sorry, the week after next to discuss this internally. But yeah, some of - those are some of the things that are coming out of that.
Traci Shanklin 32:40
One of the things that we want to do is start talking directly to members. And I mean, honestly, John, nobody has ever been as clear in helping me. I mean, I've looked at these hybrid plans a million times, but your explanation of how we got here, and why they make sense, was one of the clearest and the easiest, you know, simplified ways I've ever heard it explained. And I think that's really useful to people to hear especially members themselves.
John Elliot 33:09
Yeah, it bothers me when members blame, you know, the union leaders for the state of their fund, you know, and it's just not fair, because it wasn't their fault. I mean, listen, not that there weren't people that made bad decisions or whatever. But in general, you know, the plan's not gonna fail unless the structural inefficiencies of the plan get impacted, which is what happened in that. And they were forced to - they're forced to do something because then employers were like, "We can't lose this tax deductibility." And again, they're nearly 100% funded. Plans could pull out, right? They could - they could stop being union.
Traci Shanklin 33:45
John Elliot 33:45
I mean, back then that was a big fear. So again, thinking about the fears and thinking about the situation and demands from the employers, something had to be done, and nobody could have anticipated what was going to happen in the 2000s. And yeah, they made that move and increased the benefits. And then you had 10 years of zero return in equities, which was unprecedented. Even in the Great Depression, there was - there was a higher return than there was in 2000s. So yeah, it's, you know, it, unfortunately, is something that has just decimated these plans, and some of them beyond repair.
Traci Shanklin 34:22
Yeah, very scary.
John Elliot 34:24
Traci Shanklin 34:25
But like I said, I've long held the belief that these hybrid plans, I actually see that - see it as a real business opportunity for the right company. You know, I used to work with, you know, Cigna, which became Prudential, and I'm like, why aren't they looking at these plans? I mean, are they really that hard? Are they really that differently structured if you combine the two elements, and who's thinking about it, and who has it on their radar because I see that there could be a real move. Again, that's just from a business - the business side of it, and just, you know, and providing to our client base what they need.
John Elliot 35:01
Yeah, absolutely. I 100% agree.
Traci Shanklin 35:03
Yeah, that's really useful information and very interesting. So, I think that that's everything. John, thank you so much for being a part of the conversation today on the podcast.
John Elliot 35:14
Well, I appreciate you having me and hope you had a nice holiday. And I appreciate you having me on.
Traci Shanklin 35:21
Thanks again for being here, John, and providing me with one of the easiest and clearest explanations of how so many plans got to be in critical condition and why these hybrid plans make sense. If you'd like to be part of the conversation, subscribe to us on Apple Podcasts, or visit our website, www.multiemployerfunds.com. That's www.multiemployerfunds.com and subscribe. Thanks again for joining the conversation where listeners connect with leading experts throughout the financial and investment world. Be part of the change.
Traci Shanklin 36:04
And that's it for this week's episode of The World of Multiemployer Benefit Funds Podcast. We'd love to hear from you. And if you have any comments, questions, or suggestions, head over to www.multiemployerfunds.com and let us know.
Traci Shanklin 36:19
Thank you for joining us, and we look forward to next time.
Transcribed by https://otter.ai